TheStreet.com's Jim Cramer says both oil futures and equity futures can move these hot issues.
Will the futures pull down the oil and gas stocks today? No, I don't mean the oil futures, I mean the equity futur
Last week when oil exploded, we caught two days of trading that dropped the stocks hard. We caught a bit of a bid in the nat gases like Chesapeake (NYSE:CHK) and Devon (NYSE:DVN) but at the end of the day, but the stocks were truly overwhelmed by the simple fact that they are in the indices.
This pattern has really held down the integrateds: last week Conoco (NYSE:COP) should have exploded, but it couldn't because it is such a big part of the S&P. Chevron (NYSE:CVX) and Exxon (NYSE: XOM) are no different.
The natural gas stocks are not as big a factor, but they can be rocked down without a problem.
I am not saying to avoid looking at the oil futures. They can control the stocks. I am saying that the equity futures tide can take down anything, even when the oil futures spike hard.
Watch 'em both. Ideally, the best time to buy is when oil is strong but the S&P futures are stronger to the downside. Witness
Devon. That stock traded 7 points lower on Thursday because of the S&P futures even as the company's prospects at plus-$13 nat gas are huge and the numbers are therefore way too low around the Street because it has so much available supply.
That's when to strike best.
Random musings: Peter Eavis and Herb Greenberg have made a cottage industry out of writing about the mezzanine lenders, Allied Capital (NYSE: ALD) and American Capital (NASDAQ:ACAS). So far these two companies have managed to avoid the fate of Indymac (NYSE: IMB). Today's "Heard on the Street," this one by Eavis -- now that Herb has left the day-to-day -- develops the same themes as usual: dividend too large, can they pay it? I figure the companies sell something saleable, up the dividends and issue more shares just to stay one step ahead of the posse. Boy, the people who run those companies must be sick of these two. They probably rejoiced when Herb went out of the Internet and TV columnist business to work at Greenberg Meritz.
At the time of publication, Cramer was long Devon.
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Related Links:
Cramer: Factors Pumping Up Oil Prices
Oil and Gas Patch Will Keep Working
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO.
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Reader Comments (Page 1 of 1)
7-01-2008 @ 10:56AM
enoriverbend said...
Peter Eavis's comments on ACAS are, frankly, idiotic, and proof that he doesn't really know how to analyze BDCs. It reminds me of how extremely wrong Eavis was on Fairfax (FFH), where he repeatedly claimed the company was going bankrupt when in fact it was extremely well run, and getting financially stronger and stronger over the time period that Eavis was slamming it.
ACAS is a very well run company, the dividend is not in danger at least until 2010, and the new accounting rules have in fact forced ACAS to write down the current value of loans that are current, up-to-date, and in no danger of failing.
In the very short term I'm sure ACAS stock prices will suffer from Eavis and from the broad brush of "all financials are bad", but in the long term Eavis will be, yet again, extremely wrong.
7-01-2008 @ 11:22AM
speculator said...
Commodities are the only place to hide in this bear market. I think the bear market will continue for some time . I don't think the SP 500 will hit 1400 again this year. In this Weekends Barron's Peter Schiff said "The US is in trouble"
www.theinvestingspeculator.com
7-02-2008 @ 10:32AM
gail plato said...
It is not that people don't want to buy new homes it is that due to the knee jerk reaction from fnma, fhlmc, & hud getting a new mortgage is difficult.
The total reliance on scoring, which is at best only 70% accurate has discouraged many good potential buyers.
The programs to correct scores based on incorrect data are cumbersom, confusing, and take a great deal of time.
It is time to go backwards to common sense so the economy can go forward.
This whole ecconomic mess started with the mortgage melt down. We need to start there to fix things.
7-02-2008 @ 10:40AM
gail plato said...
You are hiding in commodities and the biggest one is housing. Fnma, fhlmc, and hud must correct their knee jerk reaction cutting a huge % of buyers out of the market for the best rates on mortgages.
The problems with this economy started with the mortgage melt down and until common sence is applied the ecconomy will continue to be in trouble.
7-07-2008 @ 8:00PM
al Hadley said...
this would help the stock market taking all the bans off drilling for oil in the US. Give the oil co.s tax breaks for drilling for oil in the US. and keep the oil in the US. I know there is a lot of people that don't want drilling in the US, but the people in the US are suffering, why wait?